Traffic Drops 2.6%, Unit Counts Drop 1% In Q2, Says NPD
Every segment and every meal period in the restaurant industry is getting hit with traffic declines now—even quick service, according to new data from The NPD Group. Traffic during the quarter ending May fell 2.8% compared to year-earlier levels, according to the latest report from the research group's Consumer Reports on Eating Share Trends. The decline was the sharpest since 1981.

The Q2 figures marked the third straight quarter of traffic declines. Customer counts were off 0.8% September-November 2008 and 1.5% December-February '09.

"The commercial foodservice industry has been struggling since last fall," said Arnie Schwartz, president of U.S. foodservice at NPD. "And it appears that as unemployment increases, the struggle is increasing."

Traffic was off 2% in quick-service restaurants. Seven of the past nine months have shown negative growth. Casual dining saw customer counts fall another 4% while midscale restaurants were down 6%. With many restaurants continuing to raise menu prices, check averages rose 2%, but it was not enough to offset the traffic declines.

NPD noted that households with children cut back foodservice visits significantly. They attribute half the traffic decline to fewer visits at dinner by families with children. Adults without children did not cut back on visits. The group also said all meal periods saw declines in traffic, with dinner the worst affected, though even breakfast visits were down.

NPD also said its ReCount restaurant census, conducted spring and fall, found 4,000 fewer units this spring than last, a 1% drop in the total.

Consumer, Producer Prices Rise In June; Fuels Fall In July
As we've been reporting, the drops in food and energy prices that have buoyed operator profits despite declines in sales and traffic may be coming to an end. Both key commodities saw prices rise in June at both the consumer and wholesale levels, according to the Consumer Price Index and Producer Price Index reports from the Federal Bureau of Labor Statistics.

The overall CPI rose 0.7% in June on a seasonally adjusted basis, reversing a trend of flat to negative months. The CPI has fallen 1.4% in the past 12 months, driven by a 25.5% decline in energy prices. This has offset a 2.1 increase in the food index and a 1.7% increase in all other items.

Food and beverage prices increased 0.1% in June, with food-away-from-home prices also up 0.1%. The food-at-home index was flat, following six months of declines.

On the wholesale side, the overall Producer Price Index rose 1.8%, seasonally adjusted, the biggest jump in more than a year. Overall, the PPI is down 4.6% during the past 12 months.

"Finished" food prices rose 1.1%, and the energy index rose 6.6%. According to the National Restaurant Association, overall wholesale food prices rose 0.8%, the second increase in three months. Wholesale prices rose 1% in April and declined 0.6% in May. Among the commodities, fresh-vegetable prices saw a big 36% jump during the month, following a large decline in prices last month.

Meanwhile, the Energy Information Administration reported that both gasoline and diesel fuel prices fell during the week ended July 20. Average national gasoline prices fell $0.065 during the week, to $2.463. Prices were a whopping $1.60 lower than during the same time last year. Diesel prices fell $0.046 to $2.496, $2.22 lower than a year earlier.

Major Economists Hold Most Macro Forecasts Steady
As Ben Bernanke, chairman of the Federal Reserve, reported to Congress last week, it does appear the U.S. economy is slowly, slowly beginning to move back toward growth. After four consecutive quarters of real decline in the U.S. gross domestic product, the consensus forecast of the more than 50 leading economists surveyed monthly by Blue Chip Economic Indicators predicted GDP will turn positive by 1% in the current quarter. Nearly two thirds of the economists believe the recession will end in the third quarter. Most other forecasts remained fairly constant in the July survey.

The economists do expect a 2.6% real decline in GDP for the year, followed by a 2% gain in 2010. And the outlook for key disposable-income and personal-consumption numbers remains very restrained. Real DPI is expected to fall again in third-quarter '08, and consumer spending is not forecast to break above 2% before the second quarter of next year.

More than four in 10 of those surveyed believe unemployment will not reach its cyclical peak until the first quarter next year, when it's projected to peak at 10.3%

FER President's Preview Forecast Seminar Set For Next WeekFoodservice Equipment Reports' President's Preview Forecast Seminar is set for next week, Aug. 5, at the Hotel Orrington, in Evanston, Ill. If you hope to attend, you'd better register right now. The meeting will kick off at 9:45 a.m. and will end at 4 p.m., timed so many in the East and Midwest can fly in and out on the day of the meeting.

The program offers a complete overview of the equipment and supplies market that can be used for planning and budgeting 2010 and beyond. It kicks off with an open forum of leading multiunit operators discussing the challenges facing their businesses. The panel will include Duane Clark from Aramark, Bob Chuhak from Darden and Brandon Melton from Chipotle.

Then, John Muldowney, principal at Clarity Marketing, Tipp City, Ohio, will join FER Publisher Robin Ashton in analyzing general economic, operator and materials-price data. Muldowney will also update his listing of the top 150 E&S manufacturers and review their performance in '08. David Greene, president of European Operations for AutoQuotes Inc., will present exclusive information on E&S manufacturer pricing trends. The meeting will close with Ashton and Muldowney offering hard-number forecasts of the E&S market in '10.

Cost of the seminar, which includes all data in both print and electronic formats, is $945. The hotel is only $159 a night. For agenda, hotel and registration information, go to www.fermag.com/events/index.htm, or call Chris Palmer at 847/336-2049.